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Thought Leadership

We report on Judge Glenn’s recent decision in Avanti Communications concerning approval of third-party releases

Judge Martin Glenn’s recent decision in Avanti Communications Group allows us to return to the ever-popular topic of third party releases in Chapter 15 cases.[1]  In prior newsletters, we discussed an IIR article written by Dan Glosband that addressed the topic in depth (click here to review the prior CBI Newsletter) and then, in October 2017, we reported on a decision by the Delaware U.S. District Court allowing third party releases in a chapter 11 case, reversing a Bankruptcy Court decision (click here for the October 2017 Newsletter report).

The thrust of our prior discussions was that third party releases are difficult to obtain in Chapter 11 cases (and essentially unavailable in the 5th, 9th, 10th  and D.C. Circuits), but they are regularly enforced on comity grounds in Chapter 15 cases involving recognition of Schemes of Arrangement( “Scheme[s]”). The reported Chapter 15/comity precedent was relied by analogy on two prior decisions by Judge Glenn, neither of which involved a Scheme.[2]

Avanti is a public company incorporated under the laws of England and Wales.  Headquartered in London, Avanti operates fixed satellite services in Europe, the Middle East and Africa.  Delays related to the launch of two satellites led to financial difficulties and, ultimately, to a Scheme that deleveraged $557 million in notes through a debt for equity swap.  Pursuant to the Scheme, which was accepted by 98% of affected noteholders, non-debtor affiliates were released by all noteholders, including the 2% who did not vote to approve the Scheme.

While there were no objections filed to recognition and enforcement of the Scheme, “…the Court believes that an explanation of the reasons for its ruling is appropriate.”   Following a detailed review of the law concerning third party releases in U.S. bankruptcy cases, the Court turned to its authority in Chapter 15 to grant “any appropriate relief” under section 1521(a) and “additional assistance” under section 1507.  Principles of comity inform the decision to grant relief under both sections (explicitly under section 1507):

“In deciding whether to grant appropriate relief or
additional assistance under chapter 15, courts are guided by principles of comity and cooperation with foreign courts. See, e.g.In re Atlas Shipping, 404 B.R. at 738; In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333 (S.D.N.Y. 2008).”

In this context, Judge Glenn noted that “[t]he proceedings under UK law in the UK courts afford creditors a full and fair opportunity to be heard in a manner consistent with US due process standards” and concluded “…that schemes of arrangements sanctioned under UK law that provide third-party nondebtor guarantor releases should be recognized and enforced under chapter 15 of the Bankruptcy Code.”  In other words, foreign representatives can obtain an order in a chapter 15 enforcing third party releases granted in the foreign proceeding by demonstrating that the foreign proceeding met U.S. standards of procedural fairness.  For now – and at least in the Southern District of New York – there is no need to satisfy the difficult standards that apply to third party releases to be granted in chapter 11 cases.

[1] In re Avanti Communications Group LLC, 582 B.R. 603 (Bankr. S.D.N.Y. 2018) (link to decision)
[2] In re Metcalfe & Mansfield Alt. Inv., 421 B.R. 685 (Bankr. S.D.N.Y. 2010)(involving Canadian orders approving settlements arising from collapse of asset-backed commercial paper market); In re Sino-Forest Corp., 501 B.R. 655 (Bankr. S.D.N.Y. 2013)(involving Canadian CCAA plan that included settlement of class action litigation against accounting firm).  While Judge Glenn also recognized and enforced a Cayman Islands Scheme that included third party releases, the decision did not discuss the issue.  In re Ocean Rig UDW Inc., 570 B.R. 687 (Bankr. S.D.N.Y. 2017); aff’d. 2018 WL 1785223 (S.D.N.Y. 2018).

Check out GRR’s recently released quarterly magazine in which Jack Esher’s survey entitled “Insolvency Mediation Around the Globe” has been published: Click here for GRR subscribers: https://globalrestructuringreview.com/download/issue/2018/march

Or nonsubscribers can view/download Jack’s article by itself:
View Jack’s GRR article by clicking on this link.


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Hon. Leif Clark (ret.) was a U.S. Bankruptcy Judge for over 25 years. He has an international reputation for influencing the development of insolvency law both domestically and internationally. He has broad experience in international legislative development, the training of lawyers and judges, scholarship and as a sought-after mediator of complex disputes involving finance and insolvency.
Jack Esher has over 25 years of experience as a mediator, arbitrator and neutral adviser, including mediation of cross-border disputes in the country’s biggest cases. A pioneer in developing mediation as an innovative and effective dispute resolution process in insolvency matters, he has conducted mediation and negotiation trainings nationally and internationally for professionals, business leaders and judges.
Dan Glosband has 45 years of sophisticated insolvency practice, focusing on cross-border cases. He was part of the small drafting group for the UNCITRAL Model Law on Cross-Border Insolvency, one of the primary draftsmen of Chapter 15 of the Bankruptcy Code and has been an expert witness on U.S. insolvency law in major foreign proceedings.

By Jack Esher